David Jessop | Business has bigger role to play

Readers of this column may remember a time when most Caribbean economies were dominated by family-owned-and run companies.

Often linked by a family name to an older generation of Caribbean ­businessmen but much less so women, they were usually paternalistic, ­influential, and often philanthropic.

Such companies could be found in almost every Caribbean nation in CARICOM as well as in the Dominican Republic and the French and Dutch-speaking Caribbean.

Although they were in business to succeed, were sometimes autocratic, often tried to maintain a monopolistic position in their sector or country, and sometimes held back development, most coupled this with a belief that they had a social responsibility.

While aggressively pursuing commercial opportunity, these early Caribbean entrepreneurs were concerned about the welfare of their employees, and their ­personal engagement ensured that their company was about more than just delivering results for family, shareholders, or investors.

These were, and in some cases still are, the companies whose leadership was willing to support the growth of national, regional, and external bodies able to represent the interests of the private sector and aspects of civil society.

They did not do this just because they wanted to have greater influence over governments, the unions, or others, but because they saw value in supporting, for example, improvements in education, healthcare, and the public good on issues broader than their immediate ­commercial interests.

Although some may quibble or be able to cite negative experiences, to take three at random from a quite long list, they would include Goddard Enterprises in Barbados, GraceKennedy in Jamaica, Vicini (now Incia) in the Dominican Republic, as well as others with ­family names that have faded from view.

These and similar socially responsible Caribbean companies continue to operate in nations from Guyana to Dominica and the Dominican Republic and remain imbued with a social ethos not found in many North American or European ­corporations. Others, however, have become publicly quoted or have been the subject of takeovers or mergers. These are often run by younger very able graduates with MBAs who are focused to a much greater extent on delivering shareholder value, maximising profits, and defending a narrow range of interests.

It is a development that has occurred in many other parts of the developing world and has been facilitated by the development of capital markets, the creation of regional stock exchanges, and the ease with which money can flow between once relatively isolated markets and jurisdictions.

In the last few decades, this has been the way of the world, driven by large corporations and ultra-wealthy individuals whose behaviour in response to economic globalisation at worst is summed up in the movie Wall Street when Gordon Gekko says that not only is greed good, but that it “captures the essence of the evolutionary spirit”.

This oversimplified and ­corrupting world view has, however, begun to change as significant numbers of major corporations and some thought-provoking writers have begun to question the role of business and its social utility.

In August, the US Business Roundtable, which brings together about 200 of the country’s largest corporations, including names such as Amazon and General Motors, updated its thinking about the role of a corporation.

Since 1997, the powerful ­business body has regularly ­published a Principles of Corporate Governance document, which has stated that corporations exist ­principally to serve their shareholders. However, in a groundbreaking statement, it said this year that it had become clear to its members that such language does not accurately describe the ways in which CEOs “endeavour every day to create value for all our ­stakeholders, whose long-term interests are inseparable”.

It also noted that many Americans were struggling, too often hard work was not rewarded, and “not enough is being done for workers to adjust to the rapid pace of change in the economy.

“If companies fail to recognise that the success of our system is dependent on inclusive long-term growth, many will raise legitimate questions about the role of large employers in our society,” the US Business Roundtable observed.

This near revolutionary thought is encapsulated in an influential book published last year, which focuses on the failures of modern capitalism.

Written by Paul Collier, a respected development economist, The Future of Capitalism provides a thought-provoking conservative critique of the deep problems facing market economies, the inequalities that have been created, and the need to find ethical and economically rational ways to address the social imbalances that are in danger of tearing them apart.

Professor Collier argues that the answer lies in ‘shared belonging’ and setting aside ‘entitled individualism’ and ‘revivalist ­ideologies’ so that those who are successful accept ‘a web of ­reciprocal obligation’.

This he suggests should be the basis for addressing the widening social inequalities that modern ­capitalism has created and which have led to the rise of potentially dangerous populist movements.

His answers, which are as much about ethics as economics, suggest that business, individuals, and ­governments steer capitalism towards long-term solutions that provide for the common good.

To be clear, his is an argument about the emergence of just ­societies in which business plays a leading, more balanced and equitable role in social development; ideas, although subject to justifiable caveats and criticism, that have found support from individuals like Bill Gates and the leader writers of the Financial Times.

What Professor Collier proposes in a highly accessible way is a new model for society that would fit well with and find resonance in the modern Caribbean, enabling it to build on its unique sense of identity, social ­awareness, and religion-based values.

If the region’s failing education, health and social care systems, and its stagnating public service are ever to be resuscitated, Caribbean companies ought to be debating how in their own self-interest they can do more to encourage and deliver social outcomes that ensure national and regional growth.

The new dialogue on the ­purposes of capitalism suggests that there is a much wider, ­strategic, and direct social role that corporations can play while still delivering profits and shareholder value. These are issues that the Caribbean’s largest companies should be meeting to discuss with Professor Collier and others.